Vieira Marques Da Costa, Rui 
ORCID: 0000-0002-7820-7373, Dhingra, Swati ORCID: 0000-0001-5468-3415 and Machin, Stephen ORCID: 0009-0004-8130-2701
(2022)
New dawn fades: trade, labour and the Brexit exchange rate depreciation.
CEP Discussion Papers (1890).
London School of Economics and Political Science. Centre for Economic Performance, London, UK.
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Abstract
This paper studies consequences of the very large exchange rate depreciation occurring in June 2016 due to the UK electorate unexpectedly voting to leave the European Union. As news of a leave vote came in, the value of sterling plummeted, recording the biggest one day depreciation of any of the world’s four major currencies since the collapse of Bretton Woods. The prospect of Brexit really happening generated sizable differences in how much sterling depreciated against different currencies. Coupled with pre-referendum cross-country trade patterns, this generated variations in exchange rate depreciations facing businesses in different industries. The paper first considers revenue and cost channels operating through trade price responses, offering evidence of a cost shock from the price of intermediate imports rising by more in higher depreciation industries, but with no revenue offset from exports. Workers were impacted by the increased cost pressures facing businesses, not in terms of job loss but through relative real wage declines and stagnation for workers employed in industries facing larger depreciations.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | https://cep.lse.ac.uk/_new/publications/discussion... |
| Additional Information: | © 2022 The Authors |
| Divisions: | Economics Centre for Economic Performance |
| Subjects: | H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HB Economic Theory |
| JEL classification: | J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J68 - Public Policy L - Industrial Organization > L5 - Regulation and Industrial Policy > L52 - Industrial Policy; Sectoral Planning Methods P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P25 - Urban, Rural, and Regional Economics; Housing; Transportation |
| Date Deposited: | 27 Jan 2023 11:18 |
| Last Modified: | 01 Nov 2024 04:59 |
| URI: | http://eprints.lse.ac.uk/id/eprint/118043 |
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